Procedure and House Affairs Committee on March 17th, 2011

[Dr. Ned Franks]

You're into a very tricky area that's very complex, even in economics. What is normally done in a cost-benefit analysis extending well into the future is that you discount future costs and benefits to the present by what we would normally call an interest rate, but what they would call a time preference discount rate. So you're getting into something that actually is a fairly arbitrary thing. I've seen studies in government that have had a discount rate applied of over 10% and I've seen them apply at 0%.

That's one of the questions that one has to know when looking at a program with long-term implications. Crime bills are like that; building a nuclear power station is like that, with enormous long-term implications, as we're realizing these days. And education itself is very important, but then again, you have great difficulty in defining the benefits 20 years from now for education.

[The Chair, Conservative, Joe Preston]

Thank you, Professor Franks.

Thank you, Mr. Brison.

Mr. Reid, for seven minutes, please.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Thank you, Professor Franks. It's always nice to have the chance to interact with you.

First of all, let me ask you about your five proposed reforms. You ran through them very quickly, and I unfortunately, in my note-taking, fell behind at note number four. Could you repeat your proposal number four?

[Dr. Ned Franks]

Yes, certainly, sir.

Number four is that the House itself undertake an inquiry into the proper extent of the government's right to declare unilaterally that papers and records are cabinet confidences. In other words, we have two almost conflicting Speakers' rulings on that: Madame Sauvé's, which said the government has the right to declare confidential that which it wishes; and Speaker Milliken's, which says that the House has the absolute right to call for papers. Now, somewhere between those two there must be some ground rules that can be established and that Parliament and the government could agree on. That's what I was proposing there.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Okay.

I wonder if at the end of your testimony and before you leave you'd be able to take that document and leave it with the clerk so that she can get it translated and circulated to all of us in time for when we write our report.

[Dr. Ned Franks]

I have sent it to the clerk and I was hoping that it would be translated. This was late yesterday that I did it, but it will certainly be available.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Okay. Thank you.

[The Chair, Conservative, Joe Preston]

We'll make sure that it is.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Before leaving that I was going to ask if you've prepared any other papers where you've written about this, so that we can go back and look at this literature, or is this your first shot at it? I ask this simply as a way of allowing us to reference other writings you may have done on this subject.

[Dr. Ned Franks]

The only answer I can give is I don't think so, with one proviso, which is the study I did for the McDonald commission on the RCMP Security Service, Parliament and security matters, which dealt with this conceptual problem. As you all probably know, the outcome of that was to establish a committee of privy councillors. Each party in Parliament nominates a member to that committee, they're made privy councillors, and then that committee has complete access to confidential information. Then it launders that and produces a report for Parliament.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Right.

Before I pursue some other questions, I just want to mention vis-à-vis the whole Afghan detainee document item here that this is a good example of a situation in which there was a great deal of Sturm und Drang before a resolution was found, but once one was found it was possible to look into documents.

One assumes that if documents had been found that authorized or countenanced the torture or abuse of detainees we would have heard about it by now. That is to say that just because documents are confidences doesn't necessarily mean that they are hiding something nefarious. It can be the case or it cannot be the case, and there's a need for some kind of mechanism to allow in the different situations such information as is not harmful to find its way out. That was just a comment on my part.

I wanted to ask you about recommendations two and three, in particular.

Your recommendation with regard to a five-year analysis being attached to second reading bills, the costs associated with it.... I'm assuming that you would want to have us make a change to the Standing Orders as the best way of doing that, as opposed to legislatively.

[Dr. Ned Franks]

Yes. I would like that in the Standing Orders. If it needs legislation in order to get people to pay attention, then that's fine, but I would think the Standing Orders would do it, yes.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Right.

In light of what Mr. Brison said in his question, when he talked about costs being projected further out for items that have a long projected life, you went back and forth about fighter airplanes and prisons. I would have thrown in changes to the pension system as an obvious long-term implication.

Do you think there's merit in the idea of extending it beyond the five years you've suggested? Or are there so many problems inherent in heroic long-term estimates that it's best that we ought not to do that? I'm not trying to put an answer in your mouth. I'm just wondering what the answer is.

[Dr. Ned Franks]

You're asking me to think more deeply than I had time to in producing this. I can see an argument for many things. Again, I used nuclear energy as an example, but even building a dam blocks a river. You're looking at a 30- to 50-year project lifespan, and there is a good argument for that.

Now, I put five years in because I thought that was pretty safe to cover almost every significant piece of legislation, but many of them have much longer-term implications than that. However, I again emphasize the point that the farther you look into the future, the dimmer and dustier it is.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Yes. I know the way that StatsCan handles this when they're dealing with population projections, which are notoriously wrong over the long term, is that they have a high, a medium, and a low estimate as to what population trends will be.

The chief actuary, I believe, although I stand to be corrected on this, does something similar when he's attempting to project out with relation to the funding needs of the Canada Pension Plan and so on. Would that perhaps be a way of resolving the problems, and we're getting beyond the five-year horizon...?

[Dr. Ned Franks]

These are immensely complicated problems by the time you get into them. “High”, “low”, and “most likely” is a way of doing it, or saying what the likely standard deviation is going to be from it, etc. It depends on the problems and on the person looking at them as to how they do it.

But there are ways of narrowing the uncertainties, which is what we really want here, so that we have more confidence when we're looking at a bill that we understand the cost implications, so we're not just comparing apples with oranges, but we're comparing apples at 50¢ each with oranges at $2 each, and that sort of thing.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Right.

I have only 20 seconds left, so very quickly, regarding the Parliamentary Budget Officer and the recommendation there, would one of the potential roles for him be establishing some ground rules as to the sorts of metrics we ought to apply looking into the future, such as rates of inflation, population increases, depreciation on various types of assets, and so on, to recommend those that could be adopted in departmental estimates? Would that seem like a reasonable kind of possible role for him?

[Dr. Ned Franks]

Yes. I haven't for years looked at departmental estimates in the raw to know what happens. My suspicion is that pretty well every department has a different way of doing it, and there's some argument for that, because the things they're looking at are different.

But some understanding of the methodology behind cost estimates, which is something I've been impressed by with the current Parliamentary Budget Officer, is a great help in understanding what's being projected and in having confidence or a lack of confidence in the results.

[The Chair, Conservative, Joe Preston]

Thank you.

Madame DeBellefeuille, seven minutes, please.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Thank you very much, Mr. Chair.

Good afternoon, Mr. Franks. Thank you for being here.

You are the last witness in a long series of witnesses. As you know, we began the hearings yesterday morning at 9:00 and finished them at 6:00 p.m. We began again this morning at 10:00, and we will finish around 3:00 this afternoon We will be debating the thrust of the report. We will share our observations, conclusions and recommendations, and debate about them.

The Speaker was clear in his order: he wants to know whether the government has complied with the order of the House to provide documents. This may seem like a simple question, but for close to two days now, we have been working on trying to understand whether it has complied. It has seemed to us since yesterday that the government has not complied with the House order. It seems that we are missing some information. So we will debate this, after your testimony, to come to a conclusion and give a thrust to our report.

Now, what are our options if we find that the government did not comply with the House order? Earlier, you gave us five suggestions, which we could include in our recommendations. But if we find that it did not comply with the House order, what options do we have?

[Dr. Ned Franks]

The options are that you can recommend that the House find the government in contempt. You can recommend that the House find the government in contempt and have some punishment attached to it.

I can't see that because I don't think you'd want to put the whole cabinet in jail, which is an option.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

They've got lots of jails now.

[Dr. Ned Franks]

I'm from Kingston, so we know about them.

You can also just leave it at contempt. That is normally what happens to these things.

On the other hand, if the committee feels that even with the additional information that's being given it has not had time to assess it, you can report that. You can say that the initial materials given by the government were inadequate to the point that the government had failed to comply. You can also do a quick dip into the materials.

For example, you could look and see if there are adequate cost projections, if the provincial costs have been included or not. If they have done, on the crime bills, for example, an adequate assessment of how the criminal population will be affected by these, you could do this as quickly as you can.

I have not seen the amount of documentation, but my impression is that if everybody in this committee stopped talking to me right now and started reading the documents, you wouldn't be finished before July. I really don't understand how you can come to a firm answer.

You can say this is progress, but the only genuine progress will be to create a way of living with government, a modus vivendi, that ensures that this kind of thing doesn't happen again. That is where my proposals are trying to point you on both sides of the House.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. Paquette, the Bloc Québécois House leader, asked the two ministers a question when they were here. He felt that the documents that had been sent to us, despite the fact that they contained a few additional details about some bills, failed to comply with the requests that Parliament had made. Mr. Paquette asked the ministers what they were prepared to offer, what else they had and what suggestions or proposals they could make to try to accommodate our requests more fully. They remained silent. They consider that they have provided us all that they can provide.

This morning, I pointed out to the minister that two bills specifically came to my attention because there are no figures about the financial implications for the provinces. It is difficult for members, especially for those of us who represent Quebec, to make do with knowing nothing about any tax burden that is going to be offloaded onto the provinces, and about any negotiations between the feds and Quebec. What will the feds have to add to the budget to compensate Quebec for what it will cost us after the bill goes into effect? A lot of people around this table, myself included, find the lack of any response to be unacceptable and, as a result, it does not provide what we asked for.

We are in a kind of dead end, Dr. Franks. One part of the government is 100% convinced that it has given us everything required and yet, since yesterday, we on this side really and truly feel the opposite. It is a kind of a stalemate.

[Dr. Ned Franks]

The answer that you can give in a report is what the committee chooses to give. You can either say, yes, the government has met the requirement, or, no, the government hasn't, or the government presented the material in such a way that we can't assess whether it has or hasn't, or give us some more time and we'll be able to give you a good answer, or on first impression, and you can use the words prima facie...you can say prima facie, you have doubts about whether this is adequate.

If you really wanted to be nasty, which I can't imagine, you could say, “Is this all the information the government had on which it based its decision to go ahead with these bills?” Is that adequate information? If you don't feel that it's sufficient.... I mean, there are many, many, questions in this.

All I can say is I wish you luck in coming to a helpful decision. Again, I would just toot my own little project here. Really, I hope the committee can reach a consensus on how to avoid this problem in the future, or reduce the likelihood anyhow.